National pharmacare program could save $7.3 billion: study

A CMAJ study shows that a universal prescription drug progam would reduce total spending on drugs in Canada by $7.3 billion.

Dr. Danielle Martin

Rick Madonik / Toronto Star

Dr. Danielle Martin, vice-president of Women's College Hospital, co-authored a study on financing pharmacare. "This analysis is a game changer. It says to governments that you can do this without having to increase taxes by a single penny."

The call for a national pharmacare program has just grown louder with a new study showing it could reduce public and private spending on prescription drugs by $7.3 billion annually.

A paper published Monday in the Canadian Medical Association Journal pokes holes in the argument that a national program would result in substantial tax increases.

A long-time barrier to the implementation of universal prescription drug coverage in Canada has been the assumption that it would require tax increases, said Dr. Danielle Martin, one of the authors.

“This analysis is a game changer. It says to governments that you can do this without having to increase taxes by a single penny and that changes the whole conversation,” said Martin, who is also a vice president at Women’s College Hospital and an assistant professor in the departments of family and community medicine and health policy, management and evaluation at the University of Toronto.

Savings would be achieved through lower costs for generic- and brand-name drugs because of economies of scale in price negotiations and better product selection, according to the paper.

The study shows that under a best-case scenario universal public drug coverage would save taxpayers $2.9 billion annually and under the worst-case scenario it would cost them $5.4 billion. The most realistic outcome — the base-case scenario — would see an annual cost to taxpayers of $1 billion.

The study did not take into account additional savings to the health system that would be achieved when those who cannot afford to fill prescriptions start taking medications. Nor did it take into account savings that would be derived through more appropriate prescribing that a national system would be expected to promote.

A pharmacare program would be a boon to private sector drug plans, according to the study. Under a best-case scenario, the private sector would save $9.6 billion annually and under a worst-case scenario, it would save $6.6 billion. The base-case scenario, or most likely outcome, would see annual savings of $8.2 billion.

The question of whether Canada should have a pharmacare program is shaping up to be an issue in the upcoming federal election. Ontario Health Minister Eric Hoskins recently called on Ottawa to join the provinces and territories in providing a national pharmacare program.

The push for a national program dates back to 1964 when it was recommended by the Royal Commission on Health Services.

Lead author Steven Morgan points out that except for Canada, every developed country with a universal health care system has universal coverage of prescription drugs. Those countries include the United Kingdom, France, Germany, Australia, New Zealand, Norway and Sweden.

“It is absolutely unbelievable given the amount of national pride Canadians have in our medicare system that we would be such conspicuous outliers on pharmacare,” said Morgan, professor of health policy at the University of British Columbia School of Population and Public Health.

About one in 10 Canadians report they cannot afford to take their medications as prescribed.

Prescription drugs are currently funded by a patchwork of public and private programs. Provincial drug plans, which cover certain populations, such as the elderly and those on social assistance, and private insurance plans each account for 36 per cent of prescription costs in Canada; out-of-pocket payments by patients account for 22 per cent; compulsory social insurance polices, such as workers’ compensation cover 4 per cent, and federal drug plans that cover First Nations and other targeted populations account for 2 per cent.

Canadians spent just over $22 billion on drugs in 2012/13. Under a national pharmacare, spending would drop by 32 per cent to $15.1 billion for a savings of about $7.3 billion under a base-scenario estimate, according to the paper.